The financial requirements of a person are quite different if they earn and spend in foreign currencies. For NRIs and individuals with overseas sources of income, assets or debts, a typical insurance contract might not be the best fit for their financial goals. Gujarat International Finance Tec-City (GIFT IFSC), situated in Gujarat, has become an International Financial Services Centre, offering Insurance products through GIFT Insurance Offices (IIOs). GIFT City term insurance can be relevant if one has international exposure and is looking for life insurance coverage that could be designed on/around the foreign-currency needs, but may not be relevant for everyone.
What Is GIFT City Term Insurance?
The GIFT City Term insurance plan is a foreign currency-denominated (usually Dollar) pure life cover policy issued by an IFSC Insurance Office (IIO) situated at Gujarat International Finance Tec-City (GIFT City). It enables Non-Resident Indians (NRIs) to not only be exposed to the foreign currency for payments made in the form of regular premiums but also to get their claims paid back to them via the same medium, thereby protecting themselves from Indian Rupee devaluation risks. A term insurance for NRI is a simple way for NRIs to obtain adequate financial protection at a very reasonably low cost and with lots of features and flexibility to suit their particular circumstances
IFSCA has confirmed that insurance business conducted within the IFSC can be transacted in freely convertible foreign currencies within the permitted currency list of IFSCA, including US Dollars, Euros, Pounds, etc and coverage in INR is not allowed for such transactions. GIFT City term insurance is therefore a better choice for people having global financial requirements, including NRIs.
Who Is GIFT City Term Insurance Suitable For?
GIFT City term insurance should be given due consideration if your income, liabilities or financial objectives have a very large overseas element.
NRIs Earning in Foreign Currency
The foreign currency life cover may be more user-friendly for NRIs who earn in USD, GBP or EUR. For instance, an NRI earning in the US may have a considerable part of his or her income, assets and future financial obligations denominated in US dollars, Because of this a dollar denominated life cover can help match the policy benefit Because of this, for the policy conditions.
NRIs Supporting Their Families
GIFT City term insurance can be appropriate for NRIs whose dependants reside in India or abroad. When premature death of the main income earner, life insurance would enable the family to have an income stream to meet their obligations. The choice of the right policy currency and sum assured in this way should be determined by where the expenses and liabilities are generated.
Individuals With Foreign-Currency Liabilities
Having life insurance benefit available in the foreign currency of the liability will make the calculation of the cover over time much easier as there is no need to continually compare the cover against movements in the exchange rate.
Professionals With International Income
For those who may work in a multinational organisation or have foreign-based income or a financial commitment in foreign currencies, GIFT City term insurance can also be a part of the overall foreign financial protection strategy.
People With Long-Term Overseas Financial Goals
Saving for children in foreign education, foreign property purchases or some other foreign currency requirement. But in most cases, this should be considered as additional coverage per the individual’s total requirement.
What Factors Should You Consider Before Buying GIFT City Term Insurance?
There are several factors that one should contemplate before acquiring a GIFT City term insurance policy. These include:
Residency status: Check if your circumstances are good enough to be covered under an IFSC policy.
Currency of income: Determine if you predominantly earn your money through INR or other foreign currencies.
Currency of liabilities: Consider your current loans or future expenses and see if most of them are based on foreign currency.
Policy currency: You must be aware that whatever premium you pay will be in the currency of the policy; also, benefits such as death benefit and maturity benefit will be set and paid out in that currency.
Premium affordability: Decide how much insurance premium you want to pay from your and your family’s disposable income, your and family members’ budget, regular and irregular cash flows, and cash flows.
Policy terms and exclusions: Carefully read what is covered, what the limitations are, the claim procedure, surrender terms, etc., by going through the document.
Claim settlement: Understand the whole process of the death benefit amount being decided and payment, the actual place of happening, and the medium of currency.
Tax implications: Your eligibility as a resident, the policy structure that you have opted for, and applicable taxation legislations can mean variations in tax treatment of insurance proceeds.
What Are the Benefits of GIFT City Term Insurance?
GIFT City term insurance may provide several possible benefits to those with cross-border financial needs
Foreign-Currency Life Cover
One of the more important aspects is the capacity to do insurance transactions in freely convertible foreign currencies. This can be beneficial for those customers whose income and liabilities are directly tied to the value of the USD/GBP/EUR.
Better Alignment With International Financial Needs
For an NRI or a globally mobile professional, foreign-currency coverage may help in evaluating the desirability of Life Insurance vis-à-vis overseas income, liabilities, and wealth management objectives.
Relevant for NRIs and Global Indians
The IFSCA refers to the Indian diaspora being served by the foreign insurance companies offering the Indian IFS through GIFT IFSC, in particular the dollar-denominated term life insurance products.
Potentially Simplified Cross-Border Financial Planning
If the policy currency is the same as those used for purchasing main financial commitments, then it may be easier for the policyholder to assess whether or not there is enough life cover in place without doing a recurring currency conversion.
Access to an International Financial Ecosystem
GIFT IFSC is being set up as an international financial services centre, and money management services are a part of it. Insurance becomes a part of these money management services, and for external clients it offers insurance solutions keeping in mind the international business practices.
Summing Up
GIFT City term insurance is most appropriate for those whose financial affairs go beyond the Indian borders. NRIs, foreign-currency earners and those with international liabilities may find it suitable. But, if your income, expenditure and liabilities and dependants are all in India, a plain vanilla term insurance plan should normally suffice. Your choice should depend on your expectations, how much currency exposure you want and can afford and the policy terms.
